EXHIBIT 10.3


 


ADMINISTRATIVE SERVICES
AGREEMENT


 


AMONG


 


K-SEA GP LLC,


 


K-SEA GP HOLDINGS LP


 


AND


 


K-SEA TRANSPORTATION INC.


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
  1

  
	
  Section 1.2

  	
  Construction

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE II RETENTION OF KTI; SCOPE OF SERVICES

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Retention of KTI

  	
  4

  
	
  Section 2.2

  	
  Scope of Services

  	
  4

  
	
  Section 2.3

  	
  Exclusion of Services

  	
  5

  
	
  Section 2.4

  	
  Performance of Services by
  Affiliates and Third Parties

  	
  5

  
	
  Section 2.5

  	
  Intellectual Property

  	
  5

  
	
  Section 2.6

  	
  Appointment of Independent
  Accounting Firm

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE III BOOKS, RECORDS AND REPORTING

  	
  5

  
	
   

  	
   

  
	
  Section 3.1

  	
  Books and Records

  	
  5

  
	
  Section 3.2

  	
  Audits

  	
  6

  
	
  Section 3.3

  	
  Reports

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV PAYMENT AMOUNT

  	
  6

  
	
   

  	
   

  
	
  Section 4.1

  	
  Payment Amount

  	
  6

  
	
  Section 4.2

  	
  Payment of Payment Amount

  	
  7

  
	
  Section 4.3

  	
  Disputed Charges

  	
  7

  
	
  Section 4.4

  	
  Set Off

  	
  7

  
	
  Section 4.5

  	
  KTI’s Employees

  	
  7

  
	
  Section 4.6

  	
  Approval of Expenses

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE V FORCE MAJEURE

  	
  8

  
	
   

  	
   

  
	
  ARTICLE VI ASSIGNMENTS AND SUBCONTRACTS

  	
  8

  
	
   

  	
   

  
	
  Section 6.1

  	
  Assignments

  	
  8

  
	
  Section 6.2

  	
  Other Requirements

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TERMINATION

  	
  9

  
	
   

  	
   

  
	
  Section 7.1

  	
  Termination by the
  Partnership on behalf of the Partnership Group

  	
  9

  
	
  Section 7.2

  	
  Termination by KTI

  	
  10

  
	
  Section 7.3

  	
  Effect of Termination

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII CONFIDENTIAL INFORMATION

  	
  10

  
	
   

  	
   

  
	
  Section 8.1

  	
  Nondisclosure

  	
  10

  
	
  Section 8.2

  	
  Permitted Disclosure

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX LIMITATION OF LIABILITY; INDEMNIFICATION

  	
  11

  
	
   

  	
   

  
	
  Section 9.1

  	
  Limitation of KTI’s
  Liability

  	
  11

  



 


i

















 


	
  Section 9.2

  	
  Partnership’s Indemnity

  	
  11

  
	
  Section 9.3

  	
  Limitation of Damages

  	
  11

  
	
  Section 9.4

  	
  Affiliate; Third Parties

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE X DISPUTE RESOLUTION

  	
  12

  
	
   

  	
   

  
	
  ARTICLE XI GENERAL PROVISIONS

  	
  12

  
	
   

  	
   

  
	
  Section 11.1

  	
  Notices

  	
  12

  
	
  Section 11.2

  	
  Further Action

  	
  12

  
	
  Section 11.3

  	
  Binding Effect

  	
  12

  
	
  Section 11.4

  	
  Integration

  	
  13

  
	
  Section 11.5

  	
  Creditors

  	
  13

  
	
  Section 11.6

  	
  Waiver

  	
  13

  
	
  Section 11.7

  	
  Counterparts

  	
  13

  
	
  Section 11.8

  	
  Applicable Law

  	
  13

  
	
  Section 11.9

  	
  Invalidity of Provisions

  	
  13

  
	
  Section 11.10

  	
  Amendment or Restatement

  	
  13

  
	
  Section 11.11

  	
  Directly or Indirectly

  	
  13

  



 


ii

















 


ADMINISTRATIVE SERVICES
AGREEMENT


 


THIS ADMINISTRATIVE SERVICES
AGREEMENT is entered into on
              ,
2008 among K-Sea GP LLC, a Delaware limited liability company (the “General
Partner”), K-Sea GP Holdings LP, a Delaware limited partnership (the “Partnership”),
and K-Sea Transportation Inc., a Delaware corporation (“KTI” and collectively
with the General Partner and the Partnership, the “Parties” and each, a “Party”).


 


RECITALS


 


A.            The Partnership is the
owner, directly or indirectly, of interests in the Business (as hereinafter
defined);


 


B.            The Partnership Group (as
hereinafter defined) requires certain services to operate the Business and to
fulfill other general and administrative functions relating to the Business;
and


 


C.            The Partnership Group
desires that KTI provide such services, and KTI is willing to undertake such
engagement, subject to the terms and conditions of this Agreement;


 


NOW, THEREFORE, the General
Partner, the Partnership and KTI agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


Section 1.1             Definitions.  The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.


 


“Administrative
Fee” is defined in Section 4.1.


 


“Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under
common control with, the Person in question. As used herein, the term “control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.


 


“Agreement”
means this Administrative Services Agreement, as it may be amended,
supplemented or restated from time to time.


 


“Bankrupt”
with respect to any Person means such Person shall generally be unable to pay
its debts as such debts become due, or shall so admit in writing or shall make
a general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against such Person seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted


 

















 


against
it (but not instituted by it), shall remain undismissed or unstayed for a
period of 30 days; or such Person shall take any action to authorize any of the
actions set forth above.


 


“Business”
means the business of the Partnership Group.


 


“Confidential
Information” means non-public information about the disclosing Party’s
or any of its Affiliates’ business or activities that is proprietary and
confidential, which shall include, without limitation, all business, financial,
technical and other information, including software (source and object code)
and programming code, of a Party or its Affiliates marked or designated “confidential”
or “proprietary” or by its nature or the circumstances surrounding its
disclosure it should reasonably be regarded as confidential. Confidential
Information includes not only written or other tangible information, but also
information transferred orally, visually, electronically or by any other means.
Confidential Information does not include information that (i) is in or
enters the public domain without breach of this Agreement, or (ii) the
receiving Party lawfully receives from a third party without restriction on disclosure
and to the receiving Party’s knowledge without breach of a nondisclosure
obligation.


 


“Damages”
is defined in Section 9.1.


 


“Default Rate”
means an interest rate (which shall in no event be higher than the rate
permitted by applicable law) equal to the prime interest rate of the MLP’s
principal lender.


 


“Environmental
Law” means current local, county, state, federal, and/or foreign law
(including common law), statute, code, ordinance, rule, order, judgment,
decree, regulation or other legal obligation relating to the protection of
health, safety or the environment or natural resources, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. section 9601 et seq.), as amended, the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.), as amended, the Federal Water
Pollution Control Act (33 U.S.C. section 1251 et seq.), as amended, the Clean
Air Act (42 U.S.C. section 7401 et seq.), as amended, the Toxic Substances
Control Act (15 U.S.C. section 2601 et seq.), as amended, the Occupational
Safety and Health Act (29 U.S.C. section 651 et seq.), as amended, the Safe
Drinking Water Act (42 U.S.C. section 300(f) et seq.), as amended,
analogous state, tribal or local laws, and any similar, implementing or
successor law, and any amendment, rule, regulation, or directive issued
thereunder, including any determination by, or interpretation of any of the
foregoing by any Governmental Authority that has the force of law.


 


“Force
Majeure” means any cause beyond the reasonable control of a Party,
including the following causes (unless they are within such Party’s reasonable
control): acts of God, strikes, lockouts, acts of the public enemy, wars or
warlike action (whether actual or impending), arrests and other restraints of
government (civil or military), blockades, embargoes, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes,
named tropical storms and hurricanes, floods, civil disturbances, terrorism,
mechanical breakdown of machinery or equipment, explosions, confiscation or
seizure by any government or other public authority and any order of any court
of competent jurisdiction, regulatory agency or governmental body having
jurisdiction.


 


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“G&A
Services” means those general and administrative services necessary
or useful for the conduct of the business of the Partnership Group, including
accounting, corporate development, finance, marketing and legal.


 


“General
Partner” is defined in the introductory paragraph.


 


“Governmental
Approval” means any material consent, authorization, certificate,
permit, right-of-way grant or approval of any Governmental Authority that is
necessary for the construction, ownership and operation of the Business in
accordance with applicable Laws.


 


“Governmental
Authority” means any court or tribunal in any jurisdiction or any
federal, state, tribal, municipal or local government or other governmental
body, agency, authority, department, commission, board, bureau,
instrumentality, arbitrator or arbitral body or any quasi-governmental or
private body lawfully exercising any regulatory or taxing authority.


 


“KSP GP”
means K-Sea General Partner GP LLC, a Delaware limited liability company and
wholly owned subsidiary of the Partnership and the general partner of the MLP.


 


“KTI”
is defined in the introductory paragraph.


 


“KTI Party”
is defined in Section 9.1.


 


“Laws”
means any applicable statute, Environmental Law, common law, rule, regulation,
judgment, order, ordinance, writ, injunction or decree issued or promulgated by
any Governmental Authority.


 


“MLP”
means K-Sea Transportation Partners L.P., a Delaware limited partnership.


 


“MLP Group”
means the MLP or KSP GP and their respective Subsidiaries.


 


“Parties”
is defined in the introductory paragraph.


 


“Partnership”
is defined in the introductory paragraph.


 


“Partnership
Agreement” means the Amended and Restated Agreement of Limited
Partnership of the Partnership, as may be amended or restated from time to
time.


 


“Partnership
Group” means the General Partner, the Partnership and all of their
respective Subsidiaries other than the MLP Group.


 


“Payment
Amount” is defined in Section 4.1.


 


“Person”
means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization, association, government
agency or political subdivision thereof or other entity.


 


“PPI”
means the Producer Price Index (PPI), Management Consulting Services — North
American Industry Classification System (NAICS) 541610, published by the Bureau
of Labor Statistics as printed in the PPI Detailed Report,
or if such industry data is no longer published by the Bureau of Labor
Statistics, then the industry data published by the Bureau of Labor Statistics
agreed to in good faith by KTI and the General Partner to be the most analogous
to the Producer Price Index (PPI), Management Consulting Services  — North American Industry Classification
System (NAICS) 541610.


 


“Services”
is defined in Section 2.2.


 


3

















 


“Subsidiary”
means, with respect to any Person, (a) a corporation of which more than
50% of the voting power of shares entitled (without regard to the occurrence of
any contingency) to vote in the election of directors or other governing body
of such corporation is owned, directly or indirectly, at the date of
determination, by such Person, by one or more Subsidiaries of such Person or a
combination thereof, (b) a partnership (whether general or limited) in
which such Person or a Subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
more than 50% of the partnership interests of such partnership (considering all
of the partnership interests of the partnership as a single class) is owned,
directly or indirectly, at the date of determination, by such Person, by one or
more Subsidiaries of such Person, or a combination thereof, or (c) any
other Person (other than a corporation or a partnership) in which such Person,
one or more Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.


 


Other terms defined herein
have the meanings so given them.


 


Section 1.2             Construction.


 


Unless the context requires
otherwise: (a) any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa; (b) references
to Articles and Sections refer to Articles and Sections of this Agreement; (c) references
to Exhibits refer to the Exhibits attached to this Agreement, each of which is
made a part hereof for all purposes; (d) the terms “include”, “includes”, “including”
and words of like import shall be deemed to be followed by the words “without
limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to
this Agreement as a whole and not to any particular provision of this
Agreement; and (f) references to money refer to legal currency of the
United States of America. The table of contents and headings contained in this
Agreement are for reference purposes only, and shall not affect in any way the
meaning or interpretation of this Agreement.


 


ARTICLE II


 


RETENTION OF KTI; SCOPE OF
SERVICES


 


Section 2.1             Retention
of KTI.  The Partnership hereby engages
KTI to perform the Services, as directed by the General Partner, and to provide
all personnel and any facilities, goods and equipment not otherwise provided by
the Partnership Group necessary to perform the Services.  KTI hereby accepts such engagement and agrees
to perform the Services requested by the General Partner and to provide any
personnel, facilities, goods and equipment not otherwise provided by the
Partnership Group, and to provide all employees as may be reasonable and
necessary to perform the Services.


 


Section 2.2             Scope
of Services.  The “Services”
shall consist of such services the General Partner determines may be reasonable
and necessary to operate the Business, including, without limitation, any
G&A Services and those services described on Schedule I hereto.  KTI


 


4

















 


hereby
covenants and agrees that the Services will be performed in accordance with (i) applicable
material Governmental Approvals and Laws and (ii) industry standards.


 


Section 2.3             Exclusion
of Services.  The General
Partner may temporarily or permanently exclude any particular service from the
scope of the Services upon 90 days’ notice to KTI.


 


Section 2.4             Performance
of Services by Affiliates and Third Parties.  The Parties hereby agree that in discharging
its obligations hereunder, KTI may engage any of its Affiliates or any
qualified third party to perform the Services (or any part of the Services) on
its behalf and that the performance of the Services (or any part of the Services)
by any such Affiliate or third party shall be treated as if KTI performed such
Services itself. Notwithstanding the foregoing, nothing contained herein shall
relieve KTI of its obligations hereunder.


 


Section 2.5             Intellectual
Property.


 


(a)           Any (i) inventions, whether patentable or not,
developed or invented, or (ii) copyrightable material (and the intangible
rights of copyright therein) developed, by KTI, its Affiliates or its or their
employees in connection with the performance of the Services shall be the
property of KTI; provided, however, that the
Partnership Group shall be granted an irrevocable, royalty-free, non-exclusive
and non-transferable right and license to use such inventions or material; and
further provided, however, that the Partnership
Group shall only be granted such a right and license to the extent such grant
does not conflict with, or result in a breach, default, or violation of a right
or license to use such inventions or material granted to KTI by any Person
other than an Affiliate of KTI. 
Notwithstanding the foregoing, KTI will use all commercially reasonable
efforts to grant such right and license to the Partnership Group.


 


(b)           The General Partner and the Partnership hereby grant to KTI
and its Affiliates an irrevocable, royalty-free, non-exclusive and
non-transferable right and license to use, during the term of this Agreement,
any intellectual property provided by the Partnership Group to KTI or its
Affiliates, but only to the extent such use is necessary for the performance of
the Services.  KTI agrees that it and its
Affiliates will utilize such intellectual property solely in connection with
the performance of the Services.


 


Section 2.6             Appointment
of Independent Accounting Firm.  Notwithstanding anything to the contrary in
this Agreement, the Parties hereby acknowledge and agree that the General
Partner shall have the exclusive authority to appoint an independent registered
public accounting firm to audit the financial statements of the Partnership and
the General Partner.


 


ARTICLE III


 


BOOKS, RECORDS AND REPORTING


 


Section 3.1             Books
and Records.  KTI shall
maintain accurate books and records regarding the performance of the Services
and its calculation of the Payment Amount, and shall maintain such books and
records for the period required by applicable accounting practices or Law.


 


5

















 


Section 3.2             Audits.  The Partnership shall have the right, upon
reasonable notice, and at all reasonable times during usual business hours, to
audit, examine and make copies of the books and records referred to in Section 3.1.  Such right may be exercised through any agent
or employee of the Partnership Group designated in writing by it or by an
independent public accountant, attorney or other agent so designated.  The Partnership shall bear all costs and
expenses incurred in any inspection, examination or audit.  KTI shall review and respond in a timely
manner to any claims or inquiries made by the Partnership regarding matters
revealed by any such inspection, examination or audit.


 


Section 3.3             Reports.  KTI shall prepare and deliver to the
Partnership any reports provided for in this Agreement and such other reports
as the Partnership may reasonably request from time to time regarding the performance
of the Services.


 


ARTICLE IV


 


PAYMENT AMOUNT


 


Section 4.1             Payment
Amount.


 


(a)           The Partnership shall on a quarterly basis (i) pay KTI
a fixed fee of $87,500 for the then-completed quarter (as may be adjusted from
time to time as provided below, the “Administrative Fee”) and (ii) reimburse
KTI for all reasonable third-party expenses that KTI incurs on behalf of the
Partnership Group (collectively with the Administrative Fee, the “Payment
Amount”).


 


(b)           The Administrative Fee shall increase (or decrease) in the
following circumstances:


 


(i)            Beginning on the first day of April in each year
beginning with April 1, 2010, the Administrative Fee shall be adjusted so
that the new Administrative Fee for such year shall equal the product of the
then-current Administrative Fee multiplied by a fraction the numerator of which
is the PPI for the immediately preceding year and the denominator of which is
the PPI for the immediately preceding year to such year; provided,
however, that KTI shall have the right to decline any such increase
in the Administrative Fee in its sole discretion. By way of example, the
quarterly Administrative Fee for the twelve-month period beginning on
April 1, 2010 shall be equal to $87,500 times a fraction the numerator of
which is the PPI for 2009 and the denominator of which is the PPI for 2008. If
the PPI for a given year is revised after April 1 of the year in question,
then the Administrative Fee shall be adjusted accordingly.


 


(ii)           If the Partnership or any
other member of the Partnership Group acquires additional assets, then KTI may
propose a revised Administrative Fee that covers the provision of Services for
such additional assets.  If the General
Partner, on behalf of the Partnership Group and with the concurrence of the
conflicts committee of the board of directors of the General Partner, agrees to
such revised Administrative Fee, KTI shall provide Services for the additional
assets pursuant to the terms set forth herein.


 


(iii)          If the Partnership and KTI
otherwise agree to increase the Administrative Fee; provided, however, that any
such increase shall be approved


 


6





















 


by the board of directors of the General Partner
with the concurrence of the conflicts committee of such board.


 


Section 4.2             Payment
of Payment Amount.  KTI shall
invoice the Partnership within 25 days after the close of each quarter for the
estimated Payment Amount, plus or minus any adjustment necessary to correct
prior estimated billings to actual billings. 
Subject to Section 4.3, all invoices shall be due and payable, in
immediately available funds, within thirty days after receipt of each
invoice.  Upon the request of the
Partnership, KTI shall furnish a reasonable detail of the Services provided and
charges assessed during any quarter.


 


Section 4.3             Disputed
Charges.  THE PARTNERSHIP MAY, WITHIN
120 DAYS AFTER RECEIPT OF A CHARGE FROM KTI, TAKE WRITTEN EXCEPTION TO SUCH
CHARGE, ON THE GROUND THAT THE SAME WAS NOT A CORRECT CALCULATION OF THE
ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY KTI OR ITS AFFILIATES
IN CONNECTION WITH THE SERVICES. THE PARTNERSHIP SHALL NEVERTHELESS PAY KTI IN
FULL WHEN DUE THE FULL PAYMENT AMOUNT OWED TO KTI.  SUCH PAYMENT SHALL NOT BE DEEMED A WAIVER OF
THE RIGHT OF THE PARTNERSHIP TO RECOUP ANY CONTESTED PORTION OF ANY AMOUNT SO
PAID. HOWEVER, IF THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR
ANY PART THEREOF, IS ULTIMATELY DETERMINED NOT TO BE A CORRECT CALCULATION
OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY KTI OR ITS
AFFILIATES IN CONNECTION WITH ITS PROVIDING THE SERVICES HEREUNDER, SUCH AMOUNT
OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE REFUNDED BY KTI TO THE
PARTNERSHIP TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE DURING THE
PERIOD FROM THE DATE OF PAYMENT BY THE PARTNERSHIP TO THE DATE OF REFUND BY
KTI.


 


Section 4.4             Set Off.  In the event that KTI owes the Partnership a
sum certain in an uncontested amount under any other agreement, then any such
amounts may be aggregated and the Partnership and KTI may discharge their
obligations by netting those amounts against any amounts owed by the
Partnership to KTI under this Agreement. If the Partnership or KTI owes the
other party a greater aggregate amount, that Party may pay to the other Party
the difference between the amounts owed.


 


Section 4.5             KTI’s
Employees.  The
obligations under Sections 4.1 and 4.2, to the extent they relate to Services
provided by employees of KTI or its Affiliates, shall be limited to payment to
KTI for expenses in connection with its or its Affiliates’ employees engaged in
the provision of Services hereunder, and the Partnership shall not be obligated
to pay to KTI’s or its Affiliates’ employees directly any compensation,
salaries, wages, bonuses, benefits, social security taxes, workers’
compensation insurance, retirement and insurance benefits, training and other
such expenses; provided, however, that the
Partnership may, at its option, compensate such employees under one or more
equity-based incentive compensation plans for the provision of Services
hereunder; and provided further, however, that
if KTI fails to pay any employee, with the exception of employee claims for
amounts owed that KTI disputes in good faith, within 30 days of the date such
employee’s payment is due:


 


7














 


(a)           The Partnership may (i) pay such employee directly, (ii) employ
such employee directly, (iii) notify KTI and begin to pay all employees
providing service to the Partnership directly, or (iv) notify KTI that
this Agreement is terminated and employ all employees directly; and


 


(b)           KTI shall reimburse the Partnership, as the case may be, the
amount the Partnership paid to KTI for employee services that KTI did not pay
to any such employee.


 


Section 4.6             Approval
of Expenses.  KTI
acknowledges that all charges for Services assessed by KTI and included in the
Payment Amount must be approved by the persons authorized to approve such
Payment Amount pursuant to the Partnership’s governance and
delegation-of-authority process. Additionally, KTI acknowledges that the Audit
Committee of the Board of Directors of the General Partner, or if there is no
Audit Committee, the entire Board of Directors of the General Partner, may at
any time review the Payment Amounts and the levels of Services and, as a
result, may direct the Partnership to decrease the level of Services or to
dispute a prior invoice pursuant to Section 4.3.  In addition to the information KTI is
obligated to provide pursuant to Section 4.2, KTI shall provide such other
information as reasonably necessary to determine the veracity or
appropriateness of any Payment Amount hereunder.


 


ARTICLE V


 


FORCE MAJEURE


 


A
Party’s obligation under this Agreement shall be excused when and to the extent
its performance of that obligation is prevented due to Force Majeure; provided, however, that a Party shall not be excused by
Force Majeure from any obligation to pay money. The Party that is prevented
from performing its obligation by reason of Force Majeure shall promptly notify
the other Parties of that fact and shall exercise due diligence to end its
inability to perform as promptly as practicable. Notwithstanding the foregoing,
a Party is not required to settle any strike, lockout or other labor dispute in
which it may be involved; provided, however,
that, in the event of a strike, lockout or other labor dispute affecting KTI,
KTI shall use reasonable efforts to continue to perform all obligations
hereunder by utilizing its management personnel and that of its Affiliates.


 


ARTICLE VI


 


ASSIGNMENTS AND SUBCONTRACTS


 


Section 6.1             Assignments.


 


(a)           Without the prior consent of KTI, none of the Partnership or
the other members or the Partnership Group may sell, assign, transfer or convey
any of its rights, or delegate any of its obligations, under this Agreement to
any Person.


 


(b)           Without the prior consent of the Partnership, KTI may not
sell, assign, transfer or convey any of its rights, or delegate any of its
obligations, under this Agreement to any Person, other than the delegation or
performance of Services to an


 


8





















 


Affiliate of
KTI or a qualified third party as permitted by Section 2.4 and the sale,
assignment, transfer or conveyance of its rights hereunder to any such
Affiliate.


 


Section 6.2             Other
Requirements.  Subject to
the other provisions hereof:


 


(a)           All materials and workmanship used or provided in performing
the Services shall be in accordance with applicable specifications and
standards.


 


(b)           KTI shall exercise reasonable diligence to obtain the most
favorable terms or warranties available from vendors, suppliers and other third
parties, and where appropriate, KTI shall assign such warranties to the
Partnership.


 


(c)           In rendering the Services, KTI shall not discriminate
against any employee or applicant for employment because of race, creed, color,
religion, sex, national origin, age or handicap, and shall comply with all
applicable provisions of Executive Order 11246 of September 24, 1965, and
any successor order thereto.


 


(d)           KTI agrees to exercise reasonable diligence to ensure that,
during the term of this Agreement, it shall not employ unauthorized aliens as
defined in the Immigration Reform and Control Act of 1986, or any successor
law.


 


ARTICLE VII


 


TERMINATION


 


Section 7.1             Termination
by the Partnership on behalf of the Partnership Group.


 


(a)           Upon the occurrence of any of the following events, the
Partnership, on behalf of the Partnership Group, may terminate this Agreement
by giving written notice of such termination to KTI:


 


(i)            the Partnership and its Affiliates
cease to maintain a direct or indirect controlling interest in KSP GP or KTI;
or


 


(ii)           KTI’s failure to pay any
employee within thirty (30) days of the date such employee’s payment is due,
subject to the limitations described in Section 4.5.


 


Any termination under this Section 7.1(a) shall
become effective immediately upon delivery of the notice first described in
this Section 7.1(a), or such later time (not to exceed the first
anniversary of the delivery of such notice) as may be specified by the Partnership.


 


(b)           In addition to its rights under Section 7.1(a), the
Partnership may terminate this Agreement at any time by giving notice of such
termination to KTI. Any termination under this Section 7.1(b) shall
become effective 90 days after delivery of such notice, or such later time (not
to exceed the first anniversary of the delivery of such notice) as may be
specified by the Partnership.


 


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(c)           In the event that KTI becomes Bankrupt or dissolves and commences
liquidation or winding-up, this Agreement shall automatically terminate without
notice to KTI.


 


Section 7.2             Termination
by KTI.


 


(a)           KTI may terminate this Agreement by giving written notice of
such termination to the Partnership in the event that the Partnership and its
Affiliates cease to maintain a direct or indirect controlling interest in KSP
GP or KTI.  Any termination under this Section 7.2(a) shall
become effective immediately upon delivery of the notice first described in
this Section 7.2(a).


 


(b)           In addition to its rights under Section 7.2(a), KTI may
terminate this Agreement at any time by giving notice of such termination to
the Partnership. Any termination under this Section 7.2(b) shall
become effective 90 days after delivery of such notice, or such later time (not
to exceed the first anniversary of the delivery of such notice) as may be
specified by KTI.


 


Section 7.3             Effect
of Termination.  If this
Agreement is terminated in accordance with Section 7.1 or 7.2, all rights
and obligations under this Agreement shall cease except for (a) obligations
that expressly survive termination of this Agreement; (b) liabilities and
obligations that have accrued prior to such termination, including the
obligation to pay any amounts that have become due and payable prior to such
termination, and (c) the obligation to pay any portion of the Payment
Amount that has accrued prior to such termination, even if such portion has not
become due and payable at that time.


 


ARTICLE VIII


 


CONFIDENTIAL INFORMATION


 


Section 8.1             Nondisclosure.  Each of KTI and the Partnership Group agrees
that (i) it will not disclose to any third party or use any Confidential
Information disclosed to it by the other except as expressly permitted in this
Agreement, and (ii) it will take all reasonable measures to maintain the
confidentiality of all Confidential Information of the other Party in its
possession or control, which will in no event be less than the measures it uses
to maintain the confidentiality of its own information of similar type and
importance.


 


Section 8.2             Permitted
Disclosure. 
Notwithstanding the foregoing, each Party may disclose Confidential
Information (i) to the extent required by a court of competent
jurisdiction or other Governmental Authority or otherwise as required by law,
including without limitation disclosure obligations imposed under the federal
securities laws, provided that such Party has given the other Party prior
notice of such requirement when legally permissible to permit the other Party
to take such legal action to prevent the disclosure as it deems reasonable,
appropriate or necessary, or (ii) to its consultants, legal counsel,
Affiliates, accountants, banks and other financing sources and their advisors.


 


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ARTICLE IX


 


LIMITATION OF LIABILITY;
INDEMNIFICATION


 


Section 9.1             Limitation
of KTI’s Liability.  Neither KTI
nor any of its controlling persons, directors, officers, employees, agents and
permitted assigns (each, a “KTI Party”) shall have any liability to the
Partnership Group for any losses, damages (including, but not limited to,
special, indirect, punitive and/or consequential damages), claims, injury,
liability, cost or expense (“Damages”) arising out of this Agreement, whether
such Damages arise on account of the furnishing of Services hereunder, the
failure to furnish Services hereunder, or otherwise, and whether or not such
Damages were caused by the negligence of the KTI Party, including the KTI Party’s
sole negligence; provided, however, that the
foregoing limitation shall not apply to Damages caused by the KTI Party’s gross
negligence or willful, intentional misconduct.


 


Section 9.2             Partnership’s
Indemnity.  The
Partnership agrees to indemnify, defend and hold harmless each KTI Party from
and against any and all Damages arising out of this Agreement, whether such
Damages arise on account of the furnishing of Services hereunder, the failure
to furnish Services hereunder, or otherwise, and whether or not such Damages
were caused by the negligence of any KTI Party, including the KTI Party’s sole
negligence; provided, however, that the foregoing
limitation shall not apply to Damages caused by the KTI Party’s gross
negligence or willful, intentional misconduct.


 


Section 9.3             Limitation
of Damages.  If the
Partnership Group suffers Damages arising out of this Agreement, which Damages
were caused by the gross negligence or willful, intentional misconduct of any
KTI Party, KTI’s sole liability to the Partnership Group shall be to properly
perform the Services in question at no additional cost to the Partnership Group
and to pay the Partnership Group for any and all direct damages suffered by the
Partnership Group.  Notwithstanding
anything to the contrary contained herein or at Law and in equity, in no event
shall any KTI Party be liable for punitive, special, indirect, incidental or
consequential damages (including, without limitation, damages for loss of
business profits, business interruption or any other loss) arising from or
relating to any claim made under this Agreement or regarding the provision of
or the failure to provide Services, even if KTI had been advised or was aware
of the possibility of such damages.


 


Section 9.4             Affiliate;
Third Parties.  If KTI uses
the personnel of its Affiliates or third parties to provide Services, KTI shall
be responsible for the acts and omissions of such personnel and third parties
to the extent provided in this Agreement, and no Affiliate of KTI or third
party shall have any liability to the Partnership Group on account of any
Damages suffered by the Partnership Group arising out of this Agreement,
whether or not such Damages were caused by their negligence and/or gross
negligence, including their sole negligence and/or sole gross negligence, or
their willful, intentional misconduct.


 


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ARTICLE X


 


DISPUTE RESOLUTION


 


If the Parties are unable to
resolve any dispute regarding the validity or terms of this Agreement or its
termination, service or performance issues, there is a material breach of this
Agreement that has not been corrected within thirty (30) days of receipt of
notice of such breach or any other dispute between the Parties related to this
Agreement, either Party hereto may refer the matter to an arbitrator selected
in accordance with the rules of JAMS in Middlesex County, New Jersey as
the exclusive remedy for any such dispute, and in lieu of any court action,
which is hereby waived. The only exception shall be a claim by either Party for
injunctive relief pending arbitration.


 


ARTICLE XI


 


GENERAL PROVISIONS


 


Section 11.1           Notices.  All notices or other communications required
or permitted under, or otherwise in connection with, this Agreement must be in
writing and must be given by (1) depositing same in the mail, addressed to
the Person to be notified, postpaid and registered or certified with return
receipt requested, (2) transmitting by national overnight courier, (3) delivery
in person or (4) facsimile to such Party. 
Notice given by mail, national overnight courier or personal delivery
shall be effective upon actual receipt. 
Notice given by facsimile shall be effective upon confirmation of a
successful transmission.  All notices to
be sent to a Party pursuant to this Agreement shall be sent to or made at the
address, in each case as follows:


 


if to the General Partner or the Partnership:


 


K-Sea GP LLC

One Tower Center Boulevard

17th Floor

East Brunswick, NJ 08816

Attention:  President

Fax: (732) 339-6140


 


if to KTI:


 


K-Sea Transportation Inc.

One Tower Center Boulevard

17th Floor

East Brunswick, NJ 08816

Attention:  President

Fax: (732) 339-6140


 


Section 11.2           Further
Action.  The Parties shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.


 


Section 11.3           Binding
Effect.  This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns.


 


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Section 11.4           Integration.  This Agreement constitutes the entire
Agreement among the Parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.


 


Section 11.5           Creditors.  None of the provisions of this Agreement
shall be for the benefit of, or shall be enforceable by, any creditor of any
Party.


 


Section 11.6           Waiver.  No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach of any other covenant, duty, agreement or
condition.


 


Section 11.7           Counterparts.  This Agreement may be executed in
counterparts, all of which together shall constitute an agreement binding on
all the Parties hereto, notwithstanding that all such Parties are not
signatories to the original or the same counterpart. Each Party shall become
bound by this Agreement immediately upon affixing its signature hereto.


 


Section 11.8           Applicable
Law.  This Agreement shall be
construed in accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law.


 


Section 11.9           Invalidity
of Provisions.  If any
provision of this Agreement is or becomes invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.


 


Section 11.10         Amendment
or Restatement.  This
Agreement may be amended or restated only by a written instrument executed by
each of the Parties; provided, however,
that after the completion of the Partnership’s initial public offering of
common units representing limited partner interests, the Partnership may not,
without the prior approval of the conflicts committee of the board of directors
of the General Partner or, if there is no such committee, the independent
members of such board of directors, agree to any amendment or modification of
this Agreement that the General Partner determines will adversely affect the
holders of such common units.  The
Parties hereto agree that, for purposes of this Section 11.10, any
material change in the nature, quantity or duration of the Services to be
provided under this Agreement shall constitute a modification of this
Agreement.


 


Section 11.11         Directly
or Indirectly.  Where any
provision of this Agreement refers to action to be taken by any Party, or which
such Party is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Party, including
actions taken by or on behalf of any Affiliate of such Party.


 


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IN WITNESS WHEREOF, the
Parties have executed this Agreement on the date first written above.


 


	
   

  	
  K-SEA GP LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  K-SEA GP HOLDINGS LP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  K-Sea GP LLC, its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Administrative Services
Agreement


 

















 


SCHEDULE I


 


SERVICES PROVIDED BY KTI

TO THE PARTNERSHIP GROUP


 


1.             Accounting


 


2.             Information Technology


 


3.             Real Property


 


4.             Legal


 


5.             Securities and Exchange
Commission Reporting


 


6.             Administrative Services


 


7.             Financial Services


 


8.             Insurance Services


 


9.             Risk Management


 


10.           Corporate Development


 


11.           Commercial and Marketing


 


12.           Treasury


 


13.           Tax


 


14.           Audit


 


15.           Sarbanes-Oxley Compliance


 


16.           Investor Relations


 


I-1